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Not many people wake up in the morning and think about all the things that could go wrong. In fact, Australians are a pretty optimistic bunch and our positive attitude has helped us weather many storms.

But research from the Investment and Financial Services Association (IFSA) has revealed that our ‘she’ll be right’ attitude has left many of us financially vulnerable when things do go wrong. We even have the dubious honour of being one of the most underinsured nations in the developed world.

Even when we are insured, it’s not often enough

Life insurance claims figures released by the IFSA show Australian families received an average payout of just $91,000 on the death of their partner in 2008. 

According to IFSA’s deputy CEO John O’Shaughnessy, $91,000 is not enough especially when you consider that the average Australian family with young children has debts totalling $167,000.

Average payouts for total and permanent disablement during 2008 tell a similar story with nearly $71,000 paid out on average to Australians who were disabled and unable to work again. 

“When you consider the fact that with many disabilities you cannot work or earn an income again, not to mention the care and home modification costs and ongoing living expenses, these levels of coverage are simply not sufficient,” says John.

She’ll be right, right?

Not always.

If you injure yourself and are unable to work, could you afford to live without your salary? How long could you survive before being unable to pay your mortgage or rent, essential bills, school fees or medical costs?

And what about if you died? Would your family be able to pay for your funeral or medical expenses? Would the mortgage and other household bills still get paid?

If the answer to any of these questions is no, you should really consider protecting your family’s financial security and speak to a professional about your insurance options.

I’m ok, I’ve got insurance through my super

While it’s true that most Australians will have some default cover through their super fund, it’s important to review your level of cover regularly so that it’s right for your circumstances. If you find that you require more protection than your default cover provides, you can apply to increase your level of cover through your super fund.

Review your level of cover regularly

It’s a good idea to review your level of insurance if you:

• Have recently married or divorced
• Have recently had a child or grandchild
• Have refinanced your home mortgage in the past six months
• Have recently bought a new home
• Provide care or financial help to a child or parent
• Want to ensure that financial resources are available to provide assistance or long-term care for a loved one
• Have received a lump sum of any kind including an inheritance or redundancy package
• Have retired or your spouse has retired
• Have started a business

Ok, so how much is enough?

The answer will depend on your individual circumstances, but some basic principles apply. 

Working out the right amount of life insurance requires you to think about how much you would need to pay off all debts, how much money you’ll need to pay funeral costs, and how much you’d like to leave your family to meet their future financial obligations if you were to die.

According to IFSA and the Australian Bankers Association , full-time workers in their mid 30’s with young children generally need at least 10 times their taxable earnings in life cover. So if a person earns $50,000 a year, they may consider covering themselves for at least $500,000. However, working out the right amount of insurance will depend on the person’s individual circumstances.

What types of cover are available?

Death cover: provides you with a lump sum if you become terminally ill or a lump sum to your family when you die.

Total and permanent disablement (TPD) cover:  provides you with a lump sum if you are totally and permanently disabled.

Income protection insurance:  provides you with up to 75% of your regular income for up to two years if you have an illness or injury that prevents you from working. 

Some super funds, like Prime Super, also offer members access to other types of insurance. These include:

Trauma insurance: provides you with a lump sum if you suffer one of a number of specified medical conditions.

Private health insurance: may cover the cost for your treatment as a private patient in a private or public hospital and can include rebates on some services that Medicare does not cover, such as dental care, most optical care and ambulance transport.

It makes sense to take out insurance cover through your super fund.

• It's low cost – Generally super funds get bulk discount insurance rates so your premiums are cheaper. Plus because your premiums can be deducted directly from your super fund member account, it's more tax effective.
• It’s accessible – As a member of a super fund, you generally have access to automatic default cover without having to do anything other than join as a member.

• It’s simple – The products are easy to understand.

Prime Super is a not for profit industry superannuation fund. This article contains general information only and does not take account of your personal circumstances. You should obtain personal advice where appropriate. Prime Super is issued by Farm Plan Pty Limited (ABN 81 067 241 016, AFSL 219723). A Product Disclosure Statement is available from the issuer by phoning 1800 675 839.